We recently highlighted several rulings in favor of policyholders where an insurer had disputed its duty to defend underlying claims ranging from misappropriated trade secrets to infringed trademarks to trade dress violations on the basis of an expansive intellectual property (IP) exclusion in their liability insurance policies. Now another court—this time in the context of alleged violations of the right of publicity—has rejected a liability insurer’s invocation of the IP exclusion. The United States District Court for the Southern District of Florida ruled that the insured, a gentleman’s club, was owed a defense against allegations it used the underlying plaintiff’s image, without authorization, to advertise its business. While the court agreed with the insurer that the right of publicity is an IP right, it got around this by looking past the labels of the counts pled by plaintiff, and instead determining whether the factual allegations constituted a non-IP related injury otherwise covered by the policy.
In the underlying suit, plaintiff—a model, television host, and actress—claimed Porky’s Cabaret used her picture in advertisements to suggest she was an exotic dancer in-residence at the club. As alleged, not only was this not true, she never authorized the use of her image, nor was she ever compensated for its use. Accordingly, plaintiff sued the insured club under right of publicity and misappropriation of likeness theories.
In the coverage action, the insurer disclaimed any duty to defend by pointing to language in the policy that this insurance does not apply to “[p]ersonal and advertising injury arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights”—namely, the IP exclusion.
While the court recognized the right of publicity as an IP right, it ultimately rejected the insurer’s arguments. First, it agreed with the club that plaintiff’s claims could be construed as defamation claims; therefore, they constituted potentially covered “personal and advertising injury” in the form of “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization …” The court concluded this because, read together, the allegations satisfied the elements of defamation: (1) defendant made a statement, (2) that was false, (3) to a third party, (4) which resulted in harm to plaintiff’s reputation. That plaintiff “does not bring a specific cause of action for ‘defamation’, or ‘disparagement’ does not matter.” What matters are the facts alleged, “not the specific label on the cause of action.” Second, the court found that the IP exclusion did not apply because defamation is not an IP right. Since the club could potentially be held liable on grounds that did not trigger the IP exclusion, the insurer had a duty to defend.
TIP: Even if you or your company has been sued on grounds that seem entirely IP infringement-related, this should not be considered an automatic bar to insurance recovery. Always examine complaint allegations to see if they give rise to liability for injury or damage that does not implicate the IP exclusion.